0001410578-22-001992.txt : 20220728 0001410578-22-001992.hdr.sgml : 20220728 20220728161753 ACCESSION NUMBER: 0001410578-22-001992 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 58 CONFORMED PERIOD OF REPORT: 20220531 FILED AS OF DATE: 20220728 DATE AS OF CHANGE: 20220728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Q BioMed Inc. CENTRAL INDEX KEY: 0001596062 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 464013793 STATE OF INCORPORATION: NV FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55535 FILM NUMBER: 221115438 BUSINESS ADDRESS: STREET 1: 366 MADISON AVE. STREET 2: 3RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 212-588-0022 MAIL ADDRESS: STREET 1: 366 MADISON AVE. STREET 2: 3RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: ISMO Tech Solutions, Inc. DATE OF NAME CHANGE: 20140107 10-Q 1 tmb-20220531x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: May 31, 2022

or

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 000-55535

Q BIOMED INC.

(Exact name of registrant as specified in its charter)

Nevada

30-0967746

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

c/o Ortoli Rosenstadt LLP

366 Madison Avenue, 3rd Floor

New York, NY 10017

(Address of principal executive offices)

 

 

(212) 588-0022

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Symbol

Name of each exchange on which registered

None

None

None

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes         No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer      

Accelerated filer                           

Non-accelerated filer        

Smaller reporting company          

 

Emerging growth company          

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  No 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $0.001 par value

41,249,603 shares

(Class)

(Outstanding at July 21, 2022)

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Q BIOMED INC.

Condensed Consolidated Balance Sheets

    

As of May 31, 

    

As of November 30, 

2022

    

2021

(Unaudited)

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash

$

27,167

$

344,009

Accounts receivable

74,312

80,097

Inventory

22,425

22,253

Prepaid expenses and other current assets

 

21,184

 

13,121

Total current assets

 

145,088

 

459,480

Intangible assets, net

 

325,000

 

350,000

Total Assets

$

470,088

$

809,480

LIABILITIES AND STOCKHOLDERS‘ DEFICIT

 

 

Current liabilities:

 

 

Accounts payable

$

1,951,781

$

1,345,319

Accrued expenses

1,038,403

954,309

Accrued expenses - related party

 

221,000

 

71,500

Accrued interest payable

 

160,439

 

70,677

Debt

3,415,445

3,053,037

Derivative liabilities

774,051

Total current liabilities

 

7,561,119

 

5,494,842

Total Liabilities

 

7,561,119

 

5,494,842

Commitments and Contingencies (Note 6)

 

  

 

  

Stockholders' Deficit:

 

  

 

  

Preferred stock, $0.001 par value; 100,000,000 shares authorized as of May 31, 2022 and November 30, 2021

 

 

Convertible Series A, 500,000 shares designated - 227,998 shares issued and outstanding at May 31, 2022 and November 30, 2021, respectively

 

2,160,916

 

2,161,195

Convertible Series B, 1,000,000 shares designated - 345,000 and 400,000 shares issued and outstanding at May 31, 2022 and November 30, 2021, respectively

3,364,623

3,915,512

Common stock, $0.001 par value; 250,000,000 shares authorized; 39,222,374 and 28,647,788 shares issued and outstanding as of May 31, 2022 and November 30, 2021, respectively

39,222

28,648

Additional paid-in capital

 

54,947,369

 

53,335,901

Accumulated deficit

 

(67,603,161)

 

(64,126,618)

Total Stockholders' Deficit

 

(7,091,031)

 

(4,685,362)

Total Liabilities and Stockholders' Deficit

$

470,088

$

809,480

The accompanying notes are an integral part of these condensed consolidated financial statements

1

Q BioMed Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

For the three months ended

For the six months ended

    

May 31, 2022

    

May 31, 2021

    

May 31, 2022

    

May 31, 2021

Net Sales

$

170,487

$

45,000

$

245,546

$

45,000

Cost of sales

72,751

46,400

146,696

86,993

Gross income (loss)

97,736

(1,400)

98,850

(41,993)

Operating expenses:

General and administrative expenses

1,019,168

1,519,660

2,115,468

3,656,992

Research and development expenses

 

13,052

 

291,940

 

82,320

 

465,370

Total operating expenses

 

1,032,220

 

1,811,600

 

2,197,788

 

4,122,362

Loss from operations

(934,484)

(1,813,000)

(2,098,938)

(4,164,355)

Other (income) expenses:

 

 

 

 

  

Interest expense

 

454,357

 

85,209

 

868,734

 

135,334

Change in fair value of derivatives

 

(118,012)

 

10,072

 

117,805

 

27,473

Loss on debt extinguishment

232,100

56,122

Settlement of registration liability

241,875

Total other expenses

 

336,345

 

95,281

 

1,460,514

 

218,929

Net loss

(1,270,829)

(1,908,281)

(3,559,452)

(4,383,284)

Accumulated dividend on convertible preferred stock

(113,639)

(113,639)

(250,032)

(250,032)

Deemed dividend for induced conversion of convertible preferred stock

(507,927)

(507,927)

Net loss attributable to common stockholders

$

(1,892,395)

$

(2,021,920)

$

(4,317,411)

$

(4,633,316)

Net loss per share - basic and diluted

$

(0.06)

$

(0.08)

$

(0.14)

$

(0.18)

Weighted average shares outstanding, basic and diluted

 

33,005,113

 

26,283,700

 

31,318,793

 

25,473,236

The accompanying notes are an integral part of these condensed consolidated financial statements

2

Q BIOMED INC.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit

(Unaudited)

For the Three Months Ended May 31, 2022

Total

Series A Preferred Stock

Series B Preferred Stock

Common Stock

Additional Paid

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

in Capital

    

Deficit

    

Deficit

Balance as of March 1, 2022

 

227,998

$

2,160,181

 

400,000

$

3,913,734

 

31,024,865

$

31,025

$

54,397,659

$

(66,332,332)

$

(5,829,733)

Issuance of common stock for dividend payment on preferred stock

 

 

(45,600)

 

 

(80,000)

 

402,563

 

402

 

125,198

 

 

Issuance of common stock to convert Series B preferred stock

 

 

 

(55,000)

 

(550,000)

 

4,972,797

 

4,973

 

1,052,954

 

 

507,927

Deemed dividend for induced conversion of Series B preferred stock

 

 

 

 

 

 

 

(507,927)

 

 

(507,927)

Issuance of common stock to convert notes payable

 

 

 

 

 

1,889,693

 

1,890

 

280,907

 

 

282,797

Issuance of common stock to extinguish accrued liabilities

 

 

 

 

 

650,000

 

650

 

63,450

 

 

64,100

Issuance of common stock to settle derivative liability

 

 

 

 

 

245,000

 

245

 

53,410

 

 

53,655

Accumulated dividend on preferred stock

 

 

46,335

 

 

80,889

 

 

 

(127,224)

 

 

Share based compensation for services

 

 

 

 

 

37,456

 

37

 

72,042

 

 

72,079

Share based consideration for warrants modification

 

 

 

 

 

 

 

260,878

 

 

260,878

Share based compensation for options modification

179,436

179,436

Reclassification of warrants and options from equity to liability due to reassessment under ASC 815

(903,414)

(903,414)

Net loss

 

 

 

 

 

 

 

 

(1,270,829)

 

(1,270,829)

Balance as of May 31, 2022

 

227,998

$

2,160,916

 

345,000

$

3,364,623

 

39,222,374

$

39,222

$

54,947,369

$

(67,603,161)

$

(7,091,031)

For the Three Months Ended May 31, 2021

Total

Series A Preferred Stock

Series B Preferred Stock

Common Stock

Additional Paid

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

in Capital

    

Deficit

    

Deficit

Balance as of March 1, 2021

227,998

$

2,160,966

400,000

$

3,928,208

26,002,728

$

26,002

$

50,459,561

$

(58,361,071)

$

(1,786,334)

Issuance of common stock and warrants for cash

 

 

 

 

 

1,213,333

 

1,213

 

908,787

 

 

910,000

Issuance common stock for dividend payment on preferred stock

 

 

(45,599)

 

 

(80,000)

 

119,619

 

120

 

125,479

 

 

Accumulated dividend on preferred stock

 

 

46,335

 

 

67,304

 

 

 

(113,639)

 

 

Share based compensation for services

 

 

 

 

 

120,832

 

121

 

592,368

 

 

592,489

Net loss

 

(1,908,281)

(1,908,281)

Balance as of May 31, 2021

 

227,998

$

2,161,702

 

400,000

$

3,915,512

 

27,456,512

$

27,456

$

51,972,556

$

(60,269,352)

$

(2,192,126)

3

Q BIOMED INC.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit

(Unaudited)

    

For the Six Months Ended May 31, 2022

Total

Series A Preferred Stock

Series B Preferred Stock

Common Stock

Additional Paid 

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

in Capital

    

Deficit

    

Deficit

Balance as of December 1, 2021

227,998

$

2,161,195

400,000

$

3,915,512

28,647,788

$

28,648

$

53,335,901

$

(64,126,618)

$

(4,685,362)

Issuance of common stock and warrants for cash

 

 

 

 

 

400,000

 

400

 

99,630

 

 

100,030

Cash proceeds from warrants modification

20,000

20,000

Issuance common stock for dividend payment on preferred stock

(91,200)

(160,000)

680,440

680

250,520

Issuance of common stock to convert Series B preferred stock

 

 

 

(55,000)

 

(550,000)

 

4,972,797

 

4,973

 

1,052,954

 

 

507,927

Deemed dividend for induced conversion of Series B preferred stock

(507,927)

(507,927)

Issuance of common stock to convert notes payable

 

 

 

 

 

3,467,341

 

3,468

 

1,333,276

 

 

1,336,744

Issuance of common stock to extinguish accrued liabilities

676,627

676

73,223

73,899

Issuance of common stock to settle derivative liability

245,000

245

53,410

53,655

Accumulated dividend on preferred stock

 

 

90,921

 

 

159,111

 

 

 

(250,032)

 

 

Share based compensation for services

132,381

132

223,462

223,594

Share based consideration for warrants modification

277,897

277,897

Share based compensation for options modification

179,436

179,436

Adoption of ASU 2020-06

(290,967)

82,909

(208,058)

Reclassification of warrants and options from equity to liability due to reassessment under ASC 815

(903,414)

(903,414)

Net loss

 

 

 

 

 

 

 

 

(3,559,452)

 

(3,559,452)

Balance as of May 31, 2022

 

227,998

$

2,160,916

 

345,000

$

3,364,623

 

39,222,374

$

39,222

$

54,947,369

$

(67,603,161)

$

(7,091,031)

For the Six Months Ended May 31, 2021

Total

Series A Preferred Stock

Series B Preferred Stock

Common Stock

Additional Paid

Accumulated

Stockholders’

Shares

Amount

Shares

Amount

Shares

Amount

in Capital

Deficit

Deficit

Balance as of December 1, 2020

    

227,998

    

$

2,161,980

    

503,134

    

$

4,968,368

    

23,816,489

    

$

23,816

    

$

47,656,423

    

$

(55,886,068)

    

$

(1,075,481)

Issuance of common stock for cash

 

 

 

 

 

100,000

 

100

 

99,900

 

 

100,000

Issuance of common stock and warrants for cash

 

 

 

 

 

1,213,333

 

1,213

 

908,787

 

 

910,000

Issuance common stock for dividend payment on preferred stock

(91,199)

(180,627)

255,013

255

271,571

Issuance of common stock to convert notes payable

167,780

168

202,846

203,014

Issuance of common stock to convert Series B preferred stock

(103,134)

(1,031,340)

1,245,089

1,245

1,030,095

Issuance cost related to issuance of convertible notes

35,000

35

34,790

34,825

Beneficial conversion feature related to convertible notes

 

 

 

 

 

 

 

65,217

 

 

65,217

Accumulated dividend on preferred stock

 

 

90,921

 

 

159,111

 

 

 

(250,032)

 

 

Share based compensation for services

 

 

 

 

 

623,808

 

624

 

1,952,959

 

 

1,953,583

Net loss

 

 

 

 

 

 

 

 

(4,383,284)

 

(4,383,284)

Balance as of May 31, 2021

 

227,998

$

2,161,702

 

400,000

$

3,915,512

 

27,456,512

$

27,456

$

51,972,556

$

(60,269,352)

$

(2,192,126)

The accompanying notes are an integral part of these condensed consolidated financial statements

4

Q BIOMED INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the six months ended

    

May 31, 2022

    

May 31, 2021

Cash flows from operating activities:

Net loss

$

(3,559,452)

$

(4,383,284)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

Share based compensation for services

 

223,594

 

1,953,583

Share based consideration related to warrants modification

277,897

Share based compensation related to stock options modification

 

179,436

 

Change in fair value of derivative liabilities

 

117,805

 

27,473

Accretion of debt discount

 

743,393

 

109,950

Amortization expense

25,000

25,000

Settlement on registration liability

241,875

Loss on debt extinguishment

232,100

56,122

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

5,785

 

(41,400)

Prepaid expenses and other current assets

 

(8,235)

 

(31,851)

Accounts payable and accrued expenses

944,168

406,065

Accrued interest payable

 

89,762

 

(23,376)

Net cash used in operating activities

 

(486,872)

 

(1,901,718)

Cash flows from financing activities:

 

  

 

  

Proceeds received from issuance of convertible notes, net

975,000

Proceeds received from issuance of common stock and warrants

100,030

1,010,000

Proceeds received from issuance of notes to related parties

30,000

Cash advances

 

50,000

 

Proceeds received for warrants modification

20,000

Net cash provided by financing activities

 

170,030

 

2,015,000

Net (decrease) increase in cash

 

(316,842)

 

113,282

Cash at beginning of the year

 

344,009

 

177,145

Cash at end of the year

$

27,167

$

290,427

Supplemental disclosures:

 

 

Cash paid for interest

$

$

Cash paid for income taxes

$

$

Supplemental disclosures for noncash investing and financing activities:

Issuance of common stock to convert notes payable and accrued interest

$

1,336,744

$

203,014

Issuance of common stock to convert Series B preferred stock

$

550,000

$

1,031,340

Deemed dividend for induced conversion of Series B preferred stock

$

507,927

$

Accumulated dividend on convertible preferred stock

$

250,032

$

250,032

Issuance of common stock for dividend payment on preferred stock

$

251,200

$

271,826

Issuance of common stock to extinguish accrued liabilities

$

73,899

$

Issuance of common stock to settle derivative liability

$

53,655

$

Reclassification of warrants and options from equity to liability due to reassessment under ASC 815

$

903,414

$

Adoption of ASU 2020-06

$

208,058

$

Beneficial conversion feature related to convertible notes

$

$

65,217

Offering cost

$

$

69,825

The accompanying notes are an integral part of these condensed consolidated financial statements

5

Table of Contents

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Note 1 - Organization of the Company and Description of the Business

Q BioMed Inc. (“Q BioMed”), and its wholly owned subsidiaries Q BioMed Cayman SEZC and QBMG Q BioMed Germany UG (collectively, the “Company”), is a biomedical acceleration and development company focused on licensing, acquiring and providing strategic resources to life sciences and healthcare companies. Q BioMed intends to mitigate risk by acquiring multiple assets over time and across a broad spectrum of healthcare related products, companies and sectors. The Company intends to develop these assets to provide returns via organic growth, revenue production, out-licensing, sale or the spinoff of new public companies.

The accompanying condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Note 2 - Basis of Presentation and Going Concern

Basis of Presentation

The accompanying interim period unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2021 that was filed with SEC on February 28, 2022. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.

Certain prior period amounts related to Inventory within Prepaid expenses and other current assets in the accompanying unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation. There was no change to prior period current or total assets.

Going Concern

The accompanying condensed consolidated financial statements are prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has and is expected to incur net losses and cash outflows from operations in pursuit of extracting value from its acquired intellectual property. These matters, amongst others, raise doubt about the Company’s ability to continue as a going concern.

Management anticipates that the Company will have to raise additional funds and/or generate revenue from drug sales within twelve months to continue operations. Additional funding will be needed to implement the Company’s business plan that includes various expenses such as fulfilling our obligations under licensing agreements, legal, operational set-up, general and administrative, marketing, employee salaries and other related start-up expenses. Obtaining additional funding will be subject to a number of factors, including general market conditions, investor acceptance of our business plan and initial results from our business operations. These factors may impact the timing, amount, terms or conditions of additional financing available to us. If the Company is unable to raise sufficient funds, management will be forced to scale back the Company’s operations or cease its operations.

Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

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Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

COVID 19

The impact of the worldwide spread of a novel strain of coronavirus (“COVID-19”) has been unprecedented and unpredictable, but based on the Company’s current assessment, the Company does not expect any material impact on its long-term strategic plans, operations and its liquidity due to the worldwide spread of COVID-19. However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world and its assessment of the impact of COVID-19 may change.

The Impact of Russian Military Action in Ukraine

On February 24, 2022, Russian forces launched significant military action against Ukraine, which has resulted in conflict and disruption in the region. The Company is monitoring the conflict in Ukraine and any broader economic effects from the crisis. To date, the conflict between Russia and Ukraine has not had a material impact on the Company’s business, financial condition, or result of operations.

Note 3 - Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended November 30, 2021 included in the Company’s Form 10-K.

Modification of Equity Classified Awards

From time-to-time equity classified awards may be modified. On the modification date, the Company estimates the fair value of the awards immediately before and immediately after modification. The incremental increase in fair value is recognized as expense immediately to the extent the underlying equity awards are vested and on a straight-line basis over the same remaining amortization schedule as the unvested underlying equity awards. The classification of stock-based awards, including whether such instruments should be recorded as liabilities or as equity, is re-assessed on the modification date.

Induced Conversion of Convertible Preferred Stock

The Company accounts for gains or losses on extinguishment of equity-classified preferred stock as deemed dividends, to be included in the net loss per common stockholder used to calculate earnings per share. The difference between (1) the fair value of the consideration transferred to the holders of the preferred stock and (2) the carrying amount of the preferred stock (net of issuance costs) is subtracted from (or added to) net loss to arrive at net loss available to common stockholders in the calculation of earnings per share.

Sequencing Policy

The Company adopted a sequencing policy under ASC 815-40-35 (“ASC 815”) whereby in the event that reclassification of contracts from equity to liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain financial instruments with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive financial instruments, with the earliest financial instruments receiving the first allocation of shares. Pursuant to ASC 815, issuance of stock-based awards to the Company’s employees, nonemployees or directors recognized under ASC 718 are not subject to the sequencing policy. Any modifications of awards (e.g., options or warrants) that remain subject to vesting, or any modifications of awards that continue to be held by active employees, are not subject to the sequencing policy. Modifications of vested awards held by nonemployees are subject to the sequencing policy.

Recent Accounting Standards

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It

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Table of Contents

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU will be effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2021-04 is not expected to have a material impact on our financial statements or disclosures.

Recently Adopted Accounting Standards

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company elected to early adopt this guidance on December 1, 2021, on a modified retrospective basis. The adoption resulted in approximately $291,000 decrease in additional paid in capital from the derecognition of the bifurcated equity component, $208,000 increase in debt from the derecognition of the discount associated with the bifurcated equity component and $83,000 decrease to the opening balance of accumulated deficit.

Note 4 - Loss per share

Basic net loss per share was calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share was calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period using the treasury stock method or the two-class method, whichever is more dilutive. The table below summarizes potentially dilutive securities that were not considered in the computation of diluted net loss per share because they would be anti-dilutive (amounts are rounded to nearest thousand).

Potentially dilutive securities

    

May 31, 2022

    

November 30, 2021

Series A convertible preferred stock

2,280,000

2,280,000

Series B convertible preferred stock

9,857,000

11,429,000

Common stock purchase warrants

12,152,000

11,752,000

Stock Options

4,450,000

4,450,000

Convertible Notes

 

34,928,000

 

4,898,000

Potentially dilutive securities

 

63,667,000

 

34,809,000

Note 5 - Debt

The table below summarizes outstanding debt as of May 31, 2022 and November 30, 2021 (amounts are rounded to nearest thousand):

    

May 31, 2022

    

November 30, 2021

Convertible Notes Payable:

Principal value of 2021 Debentures

$

2,828,000

$

3,506,000

Fair value of bifurcated contingent put option

 

1,003,000

 

867,000

Debt discount

 

(466,000)

 

(1,320,000)

Convertible notes payable, net

3,365,000

3,053,000

Cash advances

50,000

Total debt

$

3,415,000

$

3,053,000

8

Table of Contents

Q BIOMED INC.

Notes to Condensed Consolidated Financial Statements

Convertible Notes Payable

February Debenture

On February 12, 2021, the Company issued a debenture for $0.5 million (the “February Debenture”) pursuant to a securities purchase agreement with an accredited investor dated February 12, 2021. The February Debenture may be converted at any time on or prior to maturity at the lower of $1.15 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the 2020 Debenture, the conversion price may never be less than $1.00. The debenture has a maturity date of February 12, 2022, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The debenture bears interest at the rate of 5.5% per annum, and on issuance, the Company paid to the holder a commitment fee equal to 2% of the amount of the debenture.

On January 21, 2022, the Company issued 1,055,000 shares of common stock to convert $0.5 million of outstanding debt and interest. The conversion price was reduced to $0.50. The Company recognized a loss on debt extinguishment of approximately $0.2 million as a result of the reduction of conversion price for the six months ended May 31, 2022.

July Debenture

On July 26, 2021, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold a convertible debenture (the “July Debenture”) in the principal amount of $806,250 and a warrant to purchase up to 645,000 shares of common stock (the “Warrant”) for a total purchase price of $750,000.

The July Debenture has a maturity date of April 26, 2022, provided that in case of an event of default, the debenture may become at the holder’s election immediately due and payable. The July Debenture carries an interest rate of 10% per annum, provided that any principal or interest which is not paid when due shall bear interest at the rate of 15% per annum from the due date until payment (the “Default Interest”). The Company may prepay the Debenture at 120% of the outstanding aggregate principal amount within the first 60 days of issuance and at 130% of the sum of the outstanding principal amount, the accrued and unpaid interest on the unpaid principal amount and any Default Interest from 61 to 180 days after issuance.

The holder may convert the July Debenture in its sole discretion at any time on or prior to maturity at the lower of $1.00 or 85% of the average of the four (4) lowest VWAPs during the 20 Trading Days prior to the date of such calculation. The “Variable Conversion Price” shall equal, subject to an initial floor price of $0.35 (the “Floor Price”), the lower of $1.00 and 85% of the average of the four (4) lowest VWAPs during the 20 Trading Days prior to the date of such calculation. The initial Floor Price shall be readjusted to $0.10 if following the Issue Date, VWAP of the Company shall be less than $0.35 for a total of ten days.

On December 15, 2021, the Company and the holder entered into a Mutual Release Agreement pursuant to which the holder agreed to add the $241,875 to the outstanding principal balance of July Debenture, for no consideration received by the Company, in order to resolve a breach of certain registration provisions of the securities purchase agreement.

The July Debenture is past maturity and is currently in default. However, the Company has not received any default notice from the holder.

During the three and six months ended May 31, 2022, the Company issued an aggregate 1,162,790 and 1,685,438 shares of common stock to convert $